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Special Report: How to Buy Silver
By Larry D. Spears, Contributing Writer
In late December, silver dipped to a 12-month low near $26 an ounce, and traders who responded to the barrage of "buy" recommendations were quickly rewarded as the metal soared to a high of $37.18 just two months later.
Today, silver has pulled back below $29 an ounce, giving investors another chance to establish a position before the metal makes its next move higher.
After all, the fundamental case for silver prices remains as strong as ever.
The U.S. dollar continues to weaken, inflation remains a concern, silver demand from industry and emerging markets remains strong even as supply shrinks – plus we're facing growing uncertainty over the outcome of the 2012 elections.
It's a perfect recipe for higher silver prices – most likely even higher than last year's peak at $50 per ounce.
But what's the best way to play the next upmove by the "poor man's precious metal"?
For the purist seeking to hold metals as a long-term store of value and a hedge against inflation and global turmoil, the first choice is always the physical silver itself.
Three Reasons Silver Prices Will Rally
By Deborah Baratz, Contributing Writer
With the recent volatility and lows in the gold market, many investors also have been wary of silver prices.
Silver on Friday closed down 0.4% to $28.87 per ounce. For the week, prices dropped 5.1%.
Not the prettiest picture, but for the year silver has increased more than twice the price of gold thanks to growing confidence that the global economy will dodge another recession bullet.
David Jollie, an analyst at Mitsui & Co. Precious Metals Inc., recently said to Bloomberg News, "A greater amount of confidence in the global economy generally means higher growth and that means more silver demand. If you look out beyond the end of the year, you can still see reasons to be bullish."
Why Silver Prices Will Rally
Increased Demand: The global head of metals analytics at Thomas Reuters GFMS, Philip Klapwijk, has forecast silver sales to increase as end-users expand inventories that thinned at the end of 2011.
A large portion of silver demand – 80% – comes from fabrication, which is expected to rise about 3% to 5% this year to roughly 900 million ounces.
Also helping is China's manufacturing expansion and an increased electronics industry demand.
Klapwijk also sees current monetary policy increasing investors' appetite for silver and triggering a subsequent price rise.
He expects "a continuation of very loose monetary policy," he wrote in a report earlier this year. "We also see rates likely being cut in some of the emerging-market economies such asChina, India and Brazil."
This means current silver market lulls are great buying opportunities since the long-term outlook remains bullish.
Klapwijk toldDow Jones Newswire, "We see a range for silver north of $40 and maybe getting to a low of $28" per troy ounce.
Silver Prices: New Chinese Futures Trading Supports Rally
By Michael Adams, Contributing Writer
We already told you that silver prices would rally this year, and developments last week could make the surge approach even faster.
The white metal was trending down last week until dovish remarks from Team Bernanke following the Federal Open Market Committee meeting on April 25 reversed the price slide. Spot silver prices on the Comex ended the week at $31.27.
But there's another reason supporting a long-term silver price climb.
That reason lies in a news item out of China that many investors may have missed.
China and Silver Prices
On April 26, China Daily reported that the Shanghai Futures Exchange received approval to begin trading silver futures.
Previously, Asian investors had to access international markets to trade silver futures, or else they could trade indirectly on local Chinese markets.
"There has been an absence of a means of trading in silver in China," Wang Ruilei, an analyst with precious metal trader CGS Co Ltd, told China Daily. "The market will be bigger and more liquid with the advent of these futures contracts."
The Chinese announcement allows for two major things to take place.
Buy on the Lows as Silver Prices Will Rally in 2012
By Diane Alter, Contributing Writer, Money Morning
Silver prices Friday headed for a gain of 0.9% this week, its biggest weekly gain in nearly two months as the metal has taken a dip this year.
But silver prices are set to rally in the second of half of 2012, according to a report from the global head of metals analytics at Thomas Reuters GFMS.
Philip Klapwijk of GFMS says silver sales for industrial application as well as for jewelry, silver, silverware and photography will rise as end-users restock inventories that diminished in late 2011. Fabrication demand makes up 80% of total demand for the metal, and should be up about 3% to 5% this year to roughly 900 million ounces in 2012.
Klapwijk told Dow Jones Newswire, "We see a range for silver north of $40 and maybe getting to a low of $28" per troy ounce.
GFMS's independently researched and assembled World Silver Survey 2012, released Thursday, stated silver prices will pick up into the end of the year. Factors boosting investors' desire for silver will help drive the price.
"We see a continuation of very loose monetary policy," Klapwijk said. "We also see rates likely being cut in some of the emerging-market economies such as China, India and Brazil."
This means current silver market lulls are great buying opportunities since the long-term silver prices outlook remains bullish.
How To Buy Silver: A Guide To Today's Top Silver Investments
By Peter Krauth, Global Resources Specialist, Money Morning
As precious metals go, silver may not have quite the same mystique as gold.
But let's be honest: The "white metal" has its backers, too.
In fact, when Money Morning published its "How to Buy Gold" special report just a few weeks ago, one of the biggest questions that we received in response was: "When can you do the same for silver?"
That's just what we've done here. In this special report, we show you how to buy silver.
Silver: The "Other" Precious Metal
Although gold possesses the greatest allure of precious metals, silver has a longstanding tradition in many cultures – a tradition that in some cases reaches back thousands of years. Nearly 2,500 years ago, for instance, China was the first to use silver as money.
Here in the United States, silver alloys were still present in some of our everyday coins as recently as 40 years ago. Today, however, silver is no longer viewed that much as a monetary metal. But that's because about 40% of silver is used for industrial applications.
The physical silver market is small, with annual demand of slightly less than 900 million ounces.
Since the financial crisis of 2008, silver prices have increased by 300%.
And that's only the beginning. Silver is on the verge of a massive "short squeeze". The last time something like this happened, investors pocketed upwards of 195% in just a few months – but more on that later (Or you can get a sneak peek of our new silver special presentation right now. You can find it here.)
An important metric to understand and watch is the silver-to-gold ratio. It tells you how many ounces of silver it takes to buy one of gold. Historically, that ratio is 16 to 1. On this basis alone, silver should be much higher right now.
But perhaps a more realistic level, at least in the short term, is the ratio of silver-to-gold since the start of this bull market back in 2000. That ratio has been about 50-55 ounces of silver for one of gold. Even this more conservative estimate of silver prices vs. gold provides an excellent opportunity for investors to cash in as gold prices continue to rise.
How to Buy Silver
Like gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular.
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Physical Gold and Silver Dividends Offer Investors the Best of Both Worlds
By Peter Krauth, Global Resources Specialist, Money Morning
What if I told you there was a company that paid its shareholders in physical gold?
Would a "golden dividend" be enough to get you interested in gold stocks?
If not gold, what about silver?
Neither one of these options even existed when I first started talking about them just three months ago.
But thanks in part to billionaire resource investor Eric Sprott, today's investors can benefit from a dividend payable in physical gold or silver.
Sprott had sent a letter to silver producers, suggesting they reinvest some 25% of their earnings back into silver, rather than in cash at the bank.
That took my earlier discussion about gold and silver dividends to a totally new level: dividends in kind.
These aren't paper profits, but real, hold-in-your-hand gold and silver dividends.
For precious metals investors, these "hard asset" dividends make perfect sense.
Today, one innovative gold and silver producer offers investors the best of both worlds.
Finally: Physical Gold and Silver Dividends
In a bid to gain the "first mover" advantage, Gold Resource Corp. (NYSEAmex: GORO), a low-cost gold producer, is launching a gold and silver dividend program on April 10, 2012.
The company has already paid out $41 million in dividends to its shareholders over the past year and a half.
But now they are offering shareholders a unique option by partnering with Gold Bullion International (GBI). GBI is a New York-based precious metals provider to individual and institutional investors, with storage vaults in New York, Salt Lake City, London, Zurich, Singapore, and Australia.
Essentially, GORO shareholders can elect to convert their cash dividends into Gold Resource Corp. "Double Eagles" consisting of one ounce 0.999 fine gold and/or one ounce 0.999 fine silver rounds.
These "Double Eagles" will be drawn from GORO's physical treasury and placed into the shareholder's "individual bullion account" with GBI.
The Bernanke Effect on Gold Prices, Silver Prices Means Time to Buy Metals
By Kerri Shannon, Associate Editor, Money Morning
Gold prices hit a two-month low Wednesday after the Federal Reserve indicated no new stimulus measures would be issued, and silver prices slumped to a seven-week low.
The metals fell after the Fed, led by Chairman Ben Bernanke, announced a positive outlook on the U.S. economy. The Fed reaffirmed it would hold interest rates near zero through 2014, and failed to mention any more means of stimulus.
Without more Fed steps to stimulate growth, and with more positive U.S. economic data, investors expect the dollar to strengthen which puts downward pressure on gold and silver prices.
But the long-term outlook for gold and silver is the same, and investors should instead take the Bernanke Effect as a key time to buy metals.
"This should be treated as an opportunity to buy, or if you already own but feel you don't own enough, to accumulate," said Money Morning commodities and mining expert Peter Krauth. "These two precious metals remain in a secular bull market and are integral to every investor's portfolio."
The Bernanke Effect on Gold Prices, Silver Prices
After Tuesday's Fed announcement, gold for April delivery fell $51.30, or 3%, to finish at $1,642.90 an ounce. May silver slumped $1.40, or 4.2%, to $32.18 an ounce.
Investing In Silver: How to Buy Silver Coins and Bars
By Larry D. Spears, Contributing Writer, Money Morning
For investors who want to capture the coming move in silver, buying silver bars or coins is still one of the best options.
Here's why…
Like gold, investing in silver is a great hedge against inflation and financial turmoil alike. It's why demand for silver is increasing at an astonishing rate.
In fact, says Money Morning Global Investing Strategist Martin Hutchinson, "If silver were to match its 1980 peak, adjusted for inflation, it could climb as high as $150 an ounce."
For savvy investors who hold physical silver in bars or coins, that move would deliver roughly a 328% gain from today's spot-prices.
Investing in Silver Coins
Of the two, buying silver coins is a bit more challenging because there are so many different ways to purchase them – including rare coins.
But while rare collectible silver coins are often attractive and sometimes bring in big prices when sold, their value is quite subjective, as they are tied to a number of largely intangible factors like scarcity, wear and quality of appearance.
Rather than becoming a rare coin collector, most investors would be better off purchasing bullion coins if their intent is to ride the silver bull market.
Trading Silver with Options: How to Earn 127% in Four Months
By Larry D. Spears, Contributing Writer, Money Morning
If you listened to Money Morning's recent special report from global resources expert Peter Krauth, you know the long-term outlook for silver is decidedly positive.
Soaring investment demand, continued industrial use, a growing supply shortage, and falling ore quality all signal a sharply bullish outlook for the "poor man's precious metal."
So, how can you position yourself to profit from silver's coming advance without exposing yourself to the excessive risk?
One way is to use options – either on silver futures contracts or shares of silver-related stocks and exchange-traded funds (ETFs) – in a strategy that strictly defines and limits your risk while still offering short-term returns of 100% or more.
Silver Options: How to Create a Bull Call Spread
Known as a "bull call spread," this technique involves simultaneously buying and selling two call options with the same underlying security and expiration date, but with differing strike prices.
Typically, a bull call spread involves buying an at- or slightly in-the-money call option – one with a strike price very near the current price of the underlying asset – and simultaneously selling an out-of-the-money call option with a strike price several increments above the current security price.
The difference between the two strike prices is referred to as the "spread."
To illustrate, let's look at an example using options on silver futures, which are traded in the CME Group's Comex division. In this case, one futures options contract represents 5,000 ounces of silver.
To create your bull call spread, you would purchase the slightly in-the-money July $33.00 call, quoted at $3.451 an ounce ($17,255), and simultaneously sell the out-of-the-money July $35.00 call at a price of $2.572 an ounce ($12,860).
The net cost of this spread is 87.9 cents an ounce ($3.451 – $2.572 = $0.879), or $4,395. That is also your maximum possible loss on the trade should the July silver future stand below $33.00 when the options expire on June 26, 2012.
What's more, the spread trade breaks even at a July silver futures price of just $33.879 as opposed to the break-even price of $36.451 had you merely purchased the $33.00 call alone.
So, what's the catch?
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Special Report: How to Buy Silver
[Editor's Note: Silver surged 5.9% on Tuesday, netting its biggest one-day gain in months. And that's just the beginning of what will almost certainly be another big year for the white metal. With that in mind we wanted you to have this free report on how to buy silver. It's one of the most common questions we get from readers - and it's easier than you think.]
By Peter Krauth, Global Resources Specialist, Money Morning
Silver prices soared as high as $50 an ounce last year before experiencing a brief correction that took it back below $30.
However, despite this blip, mounting inflationary pressures, a weakening dollar, and emerging market demand will see silver retest its record highs in 2012. In fact, this time around it could even climb as high as $150 an ounce.
The white metal has already gotten off to a strong start this year, with silver for March delivery surging 5.9% on Tuesday to settle at $29.57 an ounce – the biggest one-day gain in months.
And it's just getting started. So if you don't want to miss the next big bull-run, you might consider the following instructions on how to buy silver.
How to Buy Silver
Like gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular forms.
Physical Silver: Physical silver can be purchased in a variety of sizes and weights, which determines its price. Most typical are 1.0 ounce silver coins, like the Austrian Silver Philharmonic, the American Silver Eagle, and the Canadian Silver Maple.
Their prices vary slightly due to differences in silver purity, with the Silver Maple being the highest at 99.99% pure. You'll pay about a 16% premium over the silver price for coins due to the cost of fabricating them.
Another popular option is the 100-ounce silver bar, which commands a 5% premium over the spot price of silver.
These coins and bars are essentially bought for their silver content and not as collectibles. If you're looking to build a silver stash – either large or small – bullion dealers may be the easiest way for investors to do so. But do your homework first, and check them out before you buy. Also, avoid paying more than the premiums I noted above for either coins or bars.
Some investors wonder if they should buy smaller denominations, like 1/20th, 1/10th, ¼, or ½ ounce (gold) coins. The thinking goes like this: If ever these coins need to be used to transact and make payments, one would want to have smaller "amounts" to carry around. That's a valid rationale. Even so, keep in mind that you'll pay a premium to the actual silver content, since each individual coin has to be fabricated. I believe that, should we ever get to that point, you could just convert a one-ounce coin or bar into a number of smaller coins, and pay the premium, or perhaps receive whatever else is being used for transactions (a new currency?) in return.
A few dealers that have an established reputation are:
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